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This method relies heavily upon recent sales data for comparison purpose. By seeking recently sold buildings with similar properties from the same market area, a buyer hopes to determine a fair market value for the property in analysis.


The Comparison Market Analysis method is based primarily on the principle of substitution. This method assumes an individual will pay no more for a property than it would cost to purchase a comparable substitute property. This method recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her needs for the lowest cost.


This valuation method considers the cost to rebuild the structure from scratch, taking into account the current cost of associated land, construction materials, and other costs that would be associated with the replacement of the existing structure.


In most instances when the rebuild value is involved, the overall methodology is a hybrid of the cost and comparison market analysis. The replacement cost to construct a building can be determined by adding the labor, material, and other costs. However, land values and depreciation must be derived from an analysis of comparable sales data.


This valuation method is based primarily on the amount of income an investor can expect to attain from a particular property. Because it is intended to directly reflect or model the expectations and behaviors of typical market participants, the capitalization method is generally considered the most applicable valuation technique for income-producing properties, where sufficient market data exists.

In a commercial income-producing property this approach capitalizes an income stream into a value indication. This can be done using revenue multipliers or capitalization rates applied to a Net Operating Income (NOI). Alternatively, multiple years of net operating income can be valued by a discounted cash flow analysis (DCF) model. The DCF model is widely used to value larger and more expensive income-producing properties, such as large office towers or major shopping centers.


This valuation method is occasionally used to value apartment buildings. It breaks down the building’s worth by the number of units independently of each unit’s size.

For example, a comparable building with 10 apartments priced at $2 million would have a value per door of $200,000. If you want to value a comparable property with 14 apartments, you might multiply 14 by $200,000, giving a value of $2.8 million.


This only makes sense if the apartments are roughly equivalent. It doesn’t accommodate differences in apartment size and quality, vacancy and collection costs, or unusual maintenance/repair costs.

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